Municipal Matters: Covid-19 Response and Disclosure Obligations for Municipal Bond Issuers

By: Shana Cook Mueller and Lindsay Leone

Municipal bond issuers with outstanding bonds issued on the public market are required to make disclosures to investors about the issuer’s financial and operating information, as well as any particular “material events” that relate to financial conditions for the issuer as set forth under Securities and Exchange Commission Rule 15c2-12. Specifically, such issuers are required to post material event notices and other updates to the Electronic Municipal Market Access (EMMA) website of the Municipal Securities Rulemaking Board (MSRB) within 10 days of the occurrence of such material events. In recent weeks, there has been a surge of postings by issuers to EMMA relating to impacts of Covid-19 on issuers, with the most filings coming from California, Texas and New York.

Material event postings are required for rating changes, defaults, unscheduled draws on debt service reserves, modification of the terms of a financial obligation (e.g. bonds, loans, certain leases) which reflect financial difficulties, and several other situations which may occur in times of financial strain. Another requirement for material events relates to the release, substitution, or sale of property securing repayment of the securities, if material. In some cases, waiver of tax collections or late fees by an issuer may constitute such an event.

If you are an issuer of municipal bonds on the public market and have questions about your disclosure obligations or need assistance with making a disclosure, please contact us.